Broadcom Cutting Jobs On Cellular Baseband Chip Exit

Broadcom (NASDAQ:BRCM) late Tuesday said it would wind down its cellular baseband chip business and lay off about 2,500 employees, sending its stock to a more than three-year high.

The move removed uncertainties, as the company also has mulled selling the unit.

Broadcom stock was flat in afternoon trading in the stock market today. Earlier, though, Broadcom stock rose more than 5% to its highest level since April 2011.

In the company's conference call late Tuesday, Broadcom CEO Scott McGregor said the company has been "testing the market for a potential transaction" to sell off its cellular baseband business. "We made the decision to pursue the wind down, which minimizes the ongoing loss from business and enables us to focus on our core strengths," McGregor said.

Broadcom reported earnings per share ex items of 65 cents, down 7% from the year-earlier quarter but beating the analyst consensus by a penny. Revenue fell 2% to $2.04 billion, just shy of consensus of $2.05 billion.

Broadcom forecast revenue of $2.1 billion to $2.25 billion for the current quarter, while analysts polled by Thomson Reuters expected $2.19 billion.

In early June, Broadcom cited stiff competition as the reason it was planning to exit the cellular chip business. The cellular baseband unit designs chips used in connecting smartphones, tablets and other mobile electronics to wireless networks. The strategy to exit the business was expected to result in annual cost savings of $700 million.

On Tuesday, Broadcom said it would wind down its baseband unit rather than sell it by closing or consolidating up to 18 company locations, cutting about 2,500 jobs.

McGregor said Broadcom plans to "focus on the broadband, connectivity and infrastructure markets," resulting in a stronger company as "gross margins, profitability and cash flows will noticeably improve."

In a research report, Canaccord Genuity analyst Matthew Ramsay said Broadcom's decision on the baseband unit "should both expedite and remove uncertainties from the path toward expanded operating margins and a refocus on core growth business investments."

Broadcom (NASDAQ:BRCM) late Tuesday said it would wind down its cellular baseband chip business and lay off about 2,500 employees, sending its stock to a more than three-year high.

The move removed uncertainties, as the company also has mulled selling the unit.

Broadcom stock was flat in afternoon trading in the stock market today. Earlier, though, Broadcom stock rose more than 5% to its highest level since April 2011.

In the company's conference call late Tuesday, Broadcom CEO Scott McGregor said the company has been "testing the market for a potential transaction" to sell off its cellular baseband business. "We made the decision to pursue the wind down, which minimizes the ongoing loss from business and enables us to focus on our core strengths," McGregor said.

Broadcom reported earnings per share ex items of 65 cents, down 7% from the year-earlier quarter but beating the analyst consensus by a penny. Revenue fell 2% to $2.04 billion, just shy of consensus of $2.05 billion.

Broadcom forecast revenue of $2.1 billion to $2.25 billion for the current quarter, while analysts polled by Thomson Reuters expected $2.19 billion.

In early June, Broadcom cited stiff competition as the reason it was planning to exit the cellular chip business. The cellular baseband unit designs chips used in connecting smartphones, tablets and other mobile electronics to wireless networks. The strategy to exit the business was expected to result in annual cost savings of $700 million.

On Tuesday, Broadcom said it would wind down its baseband unit rather than sell it by closing or consolidating up to 18 company locations, cutting about 2,500 jobs.

McGregor said Broadcom plans to "focus on the broadband, connectivity and infrastructure markets," resulting in a stronger company as "gross margins, profitability and cash flows will noticeably improve."

In a research report, Canaccord Genuity analyst Matthew Ramsay said Broadcom's decision on the baseband unit "should both expedite and remove uncertainties from the path toward expanded operating margins and a refocus on core growth business investments."

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